Google CEO Sundar Pichai told employees last week that “the stakes are high” for 2025, as the company faces increased competition and regulatory hurdles and contends with rapid advancements in artificial intelligence.

At a 2025 strategy meeting on Dec. 18, Pichai and other Google leaders, donning ugly holiday sweaters, hyped up the coming year, most notably as it pertains to what’s coming in AI, according to audio obtained by CNBC.

“I think 2025 will be critical,” Pichai said. “I think it’s really important we internalize the urgency of this moment, and need to move faster as a company. The stakes are high. These are disruptive moments. In 2025, we need to be relentlessly focused on unlocking the benefits of this technology and solve real user problems.”

Some employees attended the meeting in person at Google’s headquarters in Mountain View, California, and others tuned in virtually.

Pichai’s comments come after a year packed with some of the most intense pressure Google has experienced since going public two decades ago. While areas like search ads and cloud produced strong revenue growth, competition picked up in Google’s core markets, and the company faced internal challenges including culture clashes and concerns about Pichai’s vision for the future.

Additionally, regulation is now heavier than ever.

In August, a federal judge ruled that Google illegally holds a monopoly in the search market. The Justice Department in November asked that Google be forced to divest its Chrome internet browser unit. In a separate case, the DOJ accused the company of illegally dominating online ad technology. That trial closed in September and awaits a judge ruling.

That same month, Britain’s competition watchdog issued a statement of objections over Google’s ad tech practices, which the regulator provisionally found are impacting competition in the U.K.

“It’s not lost on me that we are facing scrutiny across the world,” Pichai said. “It comes with our size and success. It’s part of a broader trend where tech is now impacting society at scale. So more than ever, through this moment, we have to make sure we don’t get distracted.”

A Google spokesperson declined to comment.

Google’s search business still has dominant market share, but generative AI has served up all sorts of new ways for people to access online information, and has brought with it a host of new competitors.

OpenAI’s ChatGPT kicked off the hype cycle in late 2022, and investors including Microsoft have since propelled the company to a $157 billion valuation. In July, OpenAI announced it would launch a search engine of its own. Perplexity is also promoting its AI-powered search service and recently closed a $500 million funding round at a $9 billion valuation.

Google is investing heavily to try and stay on top, principally through Gemini, its AI model. The Gemini app gives users access to a number of tools, including Google’s chatbot.

Pichai said “building big, new business” is a top priority. That includes the Gemini app, which executives said they see as Google’s next app to reach half a billion users. The company currently has 15 apps that have hit that mark.

“With the Gemini app, there is strong momentum, particularly over the last few months,” Pichai said. “But we have some work to do in 2025 to close the gap and establish a leadership position there as well.”

“Scaling Gemini on the consumer side will be our biggest focus next year,” Pichai later added.

Project Astra, Google’s experimental version of a universal assistant that the company announced in May, will be updated in the first half of the year.

Another employee question asked whether Google will be able to get AI products to scale without charging $200 a month “like other companies.”

“Right now, we don’t have any plans for this kind of subscription level,” Hassabis responded, adding that he thinks the $20 monthly charge for Gemini advanced is a good value. “I wouldn’t necessarily say never but there are no plans for that at the moment.”

Toward the end of the meeting, Google welcomed to the stage Josh Woodward, the head of Google Labs. He took the microphone as the Zombie Nation song “Kernkraft 400” played loudly in the background.

“I’m going to try to do six demos in eight minutes,” said Woodward, who’s known for his high level of energy.

Woodward started by showing off Jules, a coding assistant that’s in a trusted tester’s program. He said, “It’s where the future of software development is headed.”

Woodward then shifted to AI notetaking product NotebookLM, which featured a series of updates in 2024, including a podcasting tool. Woodward demonstrated how the company is trying a new feature that allows the user to “call in” to a podcast. 

He then moved onto Project Mariner, an AI-powered multi-tasking Chrome extension. Woodward asked it to add the top restaurants from Tripadvisor to the Maps app. After a brief pause, the demo successfully worked, leading employees in attendance to erupt in applause.

Throughout the meeting, Pichai kept reminding employees of the need to “stay scrappy.” Google has gone through an extensive phase of cost cutting that included eliminating about 6% of its workforce in 2023 and a continued focus on efficiency.

As of the end of the third quarter, Alphabet had 181,269 employees, down about 5% from the end of 2022.

At one point, Pichai referenced Google founders Larry Page and Sergey Brin, who started the company 26 years ago, long before cloud computing or AI tools existed.

“In early Google days, you look at how the founders built our data centers, they were really really scrappy in every decision they made,” Pichai said. “Often, constraints lead to creativity. Not all problems are always solved by headcount.”

WATCH: Will AI stocks push higher in 2025?

Google’s blowout earnings report in April, which sparked the biggest rally in Alphabet shares since 2015 and pushed its market cap past $2 trillion for the first time, tempered fear that the company was falling behind in artificial intelligence.

As executives enthusiastically talked about the results with Google’s employees at an all-hands meeting the following week, it was clear that Wall Street viewed things differently than the company’s workforce.

“We’ve noticed a significant decline in morale, increased distrust and a disconnect between leadership and the workforce,” one employee wrote in a comment that was read by executives at the meeting. “How does leadership plan to address these concerns and regain the trust, morale and cohesion that have been foundational to our company’s success?”

The comment was highly rated on an internal forum.

“Despite the company’s stellar performance and record earnings, many Googlers have not received meaningful compensation increases” another top-rated employee question read.

That meeting set the stage for what would be a year of contrasting takes from the company’s vocal workforce. As Google faced some of the most intense pressure its experienced since going public two decades ago, so too did CEO Sundar Pichai, who took the helm in 2015.

Pichai oversaw a steady stream of revenue growth this year in key areas like search ads and cloud. The company rolled out groundbreaking technologies, rounded out its AI strategy despite a slew of embarrassing product incidents and saw its stock price rise more than 40% as of Thursday’s close, ahead of the S&P 500 but trailing rivals Meta and Amazon.

Over the course of 2024, many staffers questioned Pichai’s vision following product mishaps in the first half of the year as well as internal shake-ups and layoffs, according to conversations with more than a dozen employees, audio recordings and internal correspondence. 

As the second half of the year progressed and Google rolled out a number of eye-catching AI products, Pichai’s standing improved, though some skepticism remains, sources told CNBC.

In February, Google launched Imagen 2, which turned user prompts into AI-generated images. Immediately after it was introduced, the product came under scrutiny for historical inaccuracies discovered by users. Notably, when one user asked it to show a German soldier in 1943, the tool depicted a racially diverse set of soldiers wearing German military uniforms of the era. 

The company pulled the feature, and Pichai told employees the company had “offended our users and shown bias,” according to a memo. Google said it would take a few weeks to relaunch Imagen 2, but it ended up being six months before it was revived as Imagen 3 in August. 

“We definitely messed up on the image generation,” Google co-founder Sergey Brin told a small crowd at a hacker house in March, in a video posted to YouTube. “It was mostly due to just not thorough testing.” 

The launch of AI Overview in May caused a similar reaction. 

That product showed users AI summaries atop Google’s traditional search results. Pichai hyped the product, calling it the biggest change to search in 25 years. Once again, users were quick to find problems.

When asked “How many rocks should I eat each day,” the tool said, “According to UC Berkeley geologists, people should eat at least one small rock a day.” AI Overview also listed the vitamins and digestive benefits of rocks.

Google responded by saying it would add more guardrails to AI Overview for health-related queries but said the mistakes weren’t hallucinations, and were rather just rare edge cases. Search Vice President Liz Reid told employees at an all-hands meeting in June that AI Overview’s launch shouldn’t discourage them from taking risks. 

“We should act with urgency,” Reid said. “When we find new problems, we should do the extensive testing but we won’t always find everything and that just means that we respond.”

Beyond its AI blunders, Google also saw its greatest regulatory challenges to date in 2024.

In August, a federal judge ruled that the company illegally holds a monopoly in the search market. The Justice Department in November asked that Google be forced to divest its Chrome internet browser unit as a remedy for the ruling

The DOJ’s request represents the agency’s most aggressive attempt to break up a tech company since its antitrust case against Microsoft, which reached a settlement in 2001.

The remedies are expected to be decided next summer, and Google has said it will appeal, likely dragging out the situation a couple more years, but the company faces more antitrust hurdles. 

In a separate case, the DOJ accused the company of illegally dominating online ad technology. That trial closed in September and awaits a judge ruling. In October, a U.S. judge issued a permanent injunction that will force Google to offer alternatives to its Google Play app store for Android phones. After the ruling in October, Google won a temporary pause on the ruling, meaning it won’t have to open up Android to more app stores yet.

Google successfully launched its most powerful suite of new Gemini models that underpin all of the company’s AI products, including its lightweight model Gemini Flash, which has been popular among developers. YouTube’s combined ad and subscription revenue over the past four quarters surpassed $50 billion. 

In the third quarter, Google saw the fastest-growing cloud business across the big tech players, up 35% over last year, with operating margins of 17%. The company has also seen double-digit revenue growth for each of the past four quarters and launched Trillium, its powerful sixth generation Tensor Processing Units, or TPUs, which were also found to have powered Apple’s AI models. 

Despite the blunders, AI Overview reached nearly 1 billion monthly users by the end of October. Demand for AI software has also driven consistent growth for the company’s cloud infrastructure. And Google launched an impressive video generation product, Veo 2, this month as well as an updated AI note-taking product, NotebookLM.

Beyond AI, Google in December announced Willow, a chip the company calls its biggest step in the march toward commercially viable quantum computing. The Waymo self-driving car unit was also a bright spot, expanding its robotaxi service to three cities and laying the groundwork for even more expansion in 2025. The company has delivered 4 million fully autonomous rides this year, with plans to commercially launch in Austin, Texas, and Atlanta next year.  

But as Pichai approaches a decade running Google and starts his sixth year as CEO of parent Alphabet, questions remain about his ability to guide the company into the future.

Internally, employees routinely criticize leadership on the company’s Memegen messaging board, and some have aired their grievances publicly. 

“Google does not have one single visionary leader,” a Google software engineer wrote in a LinkedIn post earlier this year that received more than 8,500 reactions. “Not a one. From the C-suite to the SVPs to the VPs, they are all profoundly boring and glassy-eyed.”

In October, Google announced it would shake up the leadership of its ads and search division.

The company replaced longtime search boss Prabhakar Raghavan with Nick Fox, a deputy of Raghavan’s and a career Google employee. Raghavan was given the title of “chief scientist,” but internally, he is now listed as an “IC,” or individual contributor. 

Google also shifted the team working on its Gemini AI app to the Google DeepMind division, under AI head Demis Hassabis. Employees praised Pichai’s leadership shuffle, but some complained that the moves should’ve happened sooner.

Notably, some employees were perturbed when Raghavan addressed employees at an all-hands meeting in April, when he urged them to move faster, according to several people who spoke with CNBC. Raghavan noted that the staffers working to fix the failed Imagen 2 tool had increased their workloads from 100 hours a week to 120 hours to correct it in a timely manner.

Pichai has made efforts to get Google back to its nimble startup-like culture. 

When addressing employees, Pichai often name-checked co-founders Sergey Brin and Larry Page to remind them of Google’s scrappy roots. He’s flattened the company, removing 10% of middle management, according to audio of a December all-hands meeting. And in the spring, Pichai greenlit a hackathon, allowing employees to build using Google products that have yet to be announced. Pichai has also personally joined meetings with Google’s Labs team and enabled them to move quickly on products like NotebookLM, one of the company’s hit AI products in 2024.

After Brin’s hacker house appearance in March, some employees internally joked he should retake the helm, nostalgic for what they perceived as a visionary leader devoid of corporate speak. 

Brin co-founded Google with Page in 1998, but he stepped down as president of Alphabet in 2019. Brin, who remains a board member and a principal shareholder with a stake worth more than $140 billion, began appearing more frequently on campus starting in 2023, as part of an effort to help ramp up Google’s position in the hypercompetitive AI market. Employees, particularly working in AI and DeepMind said they’ve seen Brin walking around the company’s Mountain View, California, headquarters throughout the year and have been able to ask him questions for projects they’re pursuing.

Despite Brin’s reemergence, several employees told CNBC they’re doubtful he could adequately run what has become an increasingly larger and complex corporation. 

Employees said that although Pichai didn’t strike them as particularly visionary or as a wartime leader, it’s hard to find someone better suited for the job, given all the complexities of Alphabet. The key quandary remains: move too early and risk widespread criticism; move too late and risk missing the boat.

Within the company’s AI and DeepMind divisions, morale is mostly high, according to employees, boosted by hefty investments. Elsewhere, the vibes have been marred by cost cuts, bureaucracy and declining trust in leadership, employees said. 

DeepMind and AI teams have held off-sites, team-building activities, and have much bigger travel and recruiting budgets, people familiar with the matter said. In the spring, the company moved employees out of an eight-story office on San Francisco’s waterfront Embarcadero street and replaced them with AI and AI adjacent teams. 

A meme posted internally in November summed it up. 

The meme featured a photo of the cast of “Wicked” actors, where one, labeled “execs” looked longingly at one fellow actor labeled “Gemini” while ignoring the other beside her, which was labeled as “users.”

A Google spokesperson contested the idea that AI workers are receiving favorable treatment and said higher travel and recruiting budgets are not exclusive to AI teams or DeepMind. 

“Most Googlers, regardless of team, continue to feel positively about our mission and the company’s future, and are proud to work here,” the spokesperson said. 

A few employees say they’re no longer incentivized by the prospects of landing a promotion, which have become harder to achieve, and rather by the hope of avoiding layoffs. 

Despite slashing 12,000 jobs, or roughly 6% of its workforce, in 2023, Google has continued eliminating roles this year. In her first public statements as Google’s CFO, Anat Ashkenazi, told Wall Street in October that one of her top priorities would be to drive more “cost efficiencies” across the company in order to invest more in AI.

“I think any organization can always push a little further and I’ll be looking at additional opportunities,” Ashkenazi said.

That month, Google posted a job listing for a “Central Reorg Support Team Partner.” The responsibilities of that fixed-term contract position would include consulting with local HR teams and noted the need for the support staff’s “ability to operate with empathy and diffuse/de-escalate challenging conversations/situations.” 

“Hire the smartest people so they can tell us what to do,” one employee wrote on the internal forum in meme-style font atop the images of Brin and Page. “Hire a reorg consultant so they can tell us how to layoff the smartest people,” another said. 

Google ultimately took the job listing down.

Touting its AI technology to clients, Pichai’s leadership team has been aggressively pursuing federal government contracts, which has caused a heightened strain in some areas within the outspoken workforce since the beginning of the year.

Google terminated more than 50 employees after a series of protests against Project Nimbus, a $1.2 billion joint contract with Amazon that provides the Israeli government and military with cloud computing and AI services. Executives repeatedly said the contract didn’t violate any of the company’s “AI principles.”

However, documents and reports show the company’s agreement allowed for giving Israel AI tools that included image categorization, object tracking, as well as provisions for state-owned weapons manufacturers. Earlier this month, a New York Times report found that four months prior to signing on to Nimbus, officials at the company worried that signing the deal would harm its reputation and that “Google Cloud services could be used for, or linked to, the facilitation of human rights violations.”

In an all-hands meeting in April, a highly rated question asked why employees who did not participate in the protests were also fired, which was reported and cited in a National Labor Relations Board complaint from affected employees. Chris Rackow, Google’s security chief, took the stage at the all-hands and rebutted those claims.

“This was a very clear case of employees disrupting and occupying work spaces, and making other employees feel unsafe,” a Google spokesperson told CNBC, adding that the company “carefully confirmed” that every person terminated was involved in the protests. “By any standard, their behavior was completely unacceptable.”

That round of job eliminations underscored Google’s clampdown on internal discussions related to hot-button topics, including politics and geopolitical conflicts, which was encouraged by executives several years prior.

One internal meme that got more than 2,000 likes, compared Google to Star Wars’ Anakin Skywalker. The meme shows an image of a smiling childhood Skywalker, framed by one of the company’s original, colorful employee badges. The meme progresses Skywalker’s age in two later versions of the badge. 

The final badge shows Darth Vader working for “Google,” spelled out in the font of IBM’s logo.

OpenAI said Friday that in moving toward a new for-profit structure in 2025, the company will create a public benefit corporation to oversee commercial operations, removing some of its nonprofit restrictions and allowing it to function more like a high-growth startup.

“The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission,” OpenAI’s board wrote in the post. “We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”

The pressure on OpenAI is tied to its $157 billion valuation, achieved in the two years since the company launched its viral chatbot, ChatGPT, and kicked off the boom in generative artificial intelligence. OpenAI closed its latest $6.6 billion round in October, gearing up to aggressively compete with Elon Musk’s xAI as well as Microsoft, Google, Amazon and Anthropic in a market that’s predicted to top $1 trillion in revenue within a decade.

Developing the large language models at the heart of ChatGPT and other generative AI products requires an ongoing investment in high-powered processors, provided largely by Nvidia, and cloud infrastructure, which OpenAI largely receives from top backer Microsoft.

OpenAI expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC confirmed in September. Those numbers are increasing rapidly.

By transforming into a Delaware PBC “with ordinary shares of stock,” OpenAI says it can pursue commercial operations, while separately hiring a staff for its nonprofit arm and allowing that wing to take on charitable activities in health care, education and science.

The nonprofit will have a “significant interest” in the PBC “at a fair valuation determined by independent financial advisors,” OpenAI wrote.

OpenAI’s complicated structure as it exists today is the result of its creation as a nonprofit in 2015. It was founded by CEO Sam Altman, Musk and others as a research lab focused on artificial general intelligence, or AGI, which was an entirely futuristic concept at the time.

In 2019, OpenAI aimed to move past its role as solely a research lab in hopes of functioning more like a startup, so it created a so-called capped-profit model, with the nonprofit still controlling the overall entity.

“Our current structure does not allow the Board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do more than control the for-profit,” OpenAI wrote in Friday’s post.

OpenAI added that the change would “enable us to raise the necessary capital with conventional terms like our competitors.”

OpenAI’s efforts to restructure face some major hurdles. The most significant is Musk, who is in the midst of a heated legal battle with Altman that could have a significant impact on the company’s future.

In recent months, Musk has sued OpenAI and asked a court to stop the company from converting to a for-profit corporation from a nonprofit. In posts on X, he described that effort as a “total scam” and claimed that “OpenAI is evil.” Earlier this month, OpenAI clapped back, alleging that in 2017 Musk “not only wanted, but actually created, a for-profit” to serve as the company’s proposed new structure.

In addition to its face-off with Musk, OpenAI has been dealing with an outflow of high-level talent, due in part to concerns that the company has focused on taking commercial products to market at the expense of safety.

In late September, OpenAI Chief Technology Officer Mira Murati announced she would depart the company after 6½ years. That same day, research chief Bob McGrew and Barret Zoph, a research vice president, also announced they were leaving. A month earlier, co-founder John Schulman said he was leaving for rival startup Anthropic.

Altman said during a September interview at Italian Tech Week that recent executive departures were not related to the company’s potential restructuring: “We have been thinking about that — our board has — for almost a year independently, as we think about what it takes to get to our next stage,” he said.

Those weren’t the first big-name exits. In May, OpenAI co-founder Ilya Sutskever and former safety leader Jan Leike announced their departures, with Leike also joining Anthropic.

Leike wrote in a social media post at the time that disagreements with leadership about company priorities drove his decision.

“Over the past years, safety culture and processes have taken a backseat to shiny products,” he wrote.

One employee, who worked under Leike, quit soon after him, writing on X in September that “OpenAI was structured as a non-profit, but it acted like a for-profit.” The employee added, “You should not believe OpenAI when it promises to do the right thing later.”